Appendix D.

P3 Value for Money Assessment and Project Report

2019 P3 Schools Bundle
‘’

1
Classification: Public
Table of Contents

1. Summary: Using a P3 for 5 new schools – did it work? ..................................... 3

2. Background ............................................................................................................ 4
What is a P3? ........................................................................................................................................ 4
What is a traditional approach? ....................................................................................................... 4
What does a Value for Money Assessment do? .......................................................................... 4
What is net present value?................................................................................................................ 4
3. VFM Assessment of the P3 used for five new schools ....................................... 5
Money and time saved by using P3: Quantitative measures of value ................................... 5
Qualitative measures of value .......................................................................................................... 6
Major risks allocated in P3 contract ............................................................................................... 6
4. Project report.......................................................................................................... 8
Alberta Education Goals .................................................................................................................... 8
Ministry of Infrastructure Goals ....................................................................................................... 8
Project outcomes ................................................................................................................................. 9
Approaches considered ................................................................................................................... 10
Selection process .............................................................................................................................. 10
Key terms of P3 contract ................................................................................................................. 11
Monitoring during and after construction ................................................................................... 12
Accounting treatment ....................................................................................................................... 12
Project schedule ................................................................................................................................ 12
Appendix A: Commentary by KPMG ......................................................................... 14
Appendix B: Sample of risk allocations .................................................................... 17
Appendix C: Project Scope ........................................................................................ 21
Appendix D: Commentary by Fairness Auditor ........................................................ 23
Appendix E: Proponent Teams .................................................................................. 28
Appendix F: Summary of bids received .................................................................... 29
Appendix G: Payment adjustments ........................................................................... 30

2
 Value for Money Assessment and Project Report on
Alberta Public-Private Partnership (P3) Schools Bundle #2

December 2021

1. Summary: Using a P3 for 5 new schools – did it work?

By using a public-private partnership (P3) to design, build, finance and maintain (DBFM) five new
high schools in Leduc, Blackfalds, Langdon, and Edmonton as part of the Alberta Schools P3
Schools Bundle #2 (P3SB2) project (Project), the Alberta government saved approximately
$114.5 million over approximately 32.5 years (in 2021 dollars) compared to a traditional design-
bid-build (DBB) approach ($300.3 million instead of $414.8 million, a 27.6% savings)1. It will also
deliver the schools at a guaranteed fixed date. The following assessment shows that using a P3
model delivered value for money (VFM) and that it was the right choice to procure these five
schools.

Alberta’s 2020 Budget was released on February 27, 2020 where $1.23 billion (2020-2023) was
approved to fund previously announced schools in high priority areas. With this allocation, all five
high schools included in P3SB2 received full construction funding. Additionally, the budget
outlined direction for the Government of Alberta (GOA) to explore the use of alternative financing
options, including P3, subject to a VFM assessment. The VFM assessment determined that the
P3 model could add value so the procurement commenced on September 8, 2020.

The five schools were identified by their respective School Jurisdictions as high priority projects
essential to meet demand for educational programming in areas of the communities experiencing
overcrowding and high enrollment growth.

The government signed the P3 contract, with an approximate 32.5-year term, in September 2021
with Concert-Bird Partners (CBP or the contractor). The contract requires the schools to be
available for use by School Jurisdictions on May 31, 2024 so they can be fitted out and available
for students in September 2024.

The cost savings realized through the DBFM model were due to:
• life-cycle optimization;
• economies of scale;
• construction efficiencies;
• building innovations;
• risks shifted from government to the contractor; and
• a fixed cost contract.

This report explains what a P3 is and why it may be used, and provides the results of the VFM
assessment for the P3SB2 project.2

1
This savings calculation is based on the values in the bid for the P3SB2 project Request for Proposals.
2
This report was developed by the Ministry of Infrastructure and the Ministry of Education following the
value for money methodology in the Government of Alberta’s Public-Private Partnership Framework and
Guideline.

3
2. Background

What is a P3?

A P3 is a non-traditional way for government to deliver capital assets such as roads, schools,
and other types of government facilities. In the case of the P3SB2 project, the government
entered into a single agreement with a contractor, responsible for designing, building, partially
financing and maintaining the schools over an approximate 32.5-year period (two and a half
years design and construction; 30-years maintenance).3

A P3 can save time, money and reduce risk to the government by having one contractor
design, build, finance, and maintain the schools. For Alberta P3 projects, the public sector
owns the facility and provides public services to Albertans, the same as it does with a
traditional approach. In this P3, the School Jurisdictions will own the five schools and deliver
education as they do in their other schools.

What is a traditional approach?

In a traditional approach, the public sector hires an architect to design a facility, and then hires
a construction contractor to build it. Once the facility is built, the public sector operates it and
maintains it, typically by awarding numerous individual contracts for repairs and renewal. The
government pays for the construction of the facility by making progress payments (for its own
infrastructure) or by making capital grants to entities such as School Jurisdictions and health
authorities. Provincial grant funding is also used to operate and maintain the facility.

What does a Value for Money Assessment do?

A VFM assessment measures whether a P3 is the best option for a particular project. In the
case of the P3SB2 project, it compared the estimated costs of designing, building and
maintaining the same schools using the two different methods: traditional and P3. The VFM
for a project is the difference between the two costs on a risk-adjusted basis. The goal of a
P3 is to provide value to the public sector; to do so, the P3 must cost less – measured by net
present value – than the traditional method over the life of the contract.

What is net present value?

Net present value (NPV) is the value of a future sum of money at the discount date. It is a
standard method to compare the VFM over time (a dollar today is worth more than a dollar
tomorrow because of the time value of money) to assess long-term projects. It is produced by
applying a discount rate (which incorporates an inflation rate and a real interest rate) to a
future sum. The amount and timing of cash flows differ in the options for delivering the facility
(traditional and P3) and the calculation of NPV accounts for those differences. The NPV of
the cost to deliver the facility using the traditional approach is called the Public Sector
Comparator, or PSC. Typically the traditional approach is a design-bid-build (DBB). For the
P3SB2 project, a design-build (DB) is also included as a reference. The NPV of the cost to
deliver the facility using the P3 approach is called the Shadow Bid.

3
For detailed discussion on P3s, see the Annual Report of the Auditor General of Alberta 2003─2004, at
pages 49 to 72 (https://www.oag.ab.ca/wp-content/uploads/2020/05/Annual_OAG__report_2003-
2004.pdf).

4
3. VFM Assessment of the P3 used for five new schools

Money and time saved by using P3: Quantitative measures of value

This VFM assessment uses NPV as of September 30, 2021, the Financial Close date for the
Project. It includes the costs to design, build, finance, and maintain the schools for the
approximate 32.5-year agreement term. It also includes the impact of risk transfer (as
discussed later in this section) but excludes costs common to both methods, such as
broadband connections, land costs, and furniture, fixtures and equipment.

Concert-Bird Partners provided the lowest bid for the P3SB2 project at $300.3 million and the
PSC DBB was estimated at $414.8 million (both in 2021 dollars). The VFM is therefore $114.5
million or 27.6% of the PSC. The VFM assessment prepared by the financial advisor retained
for this project, KPMG, is attached in Appendix A.

Value for Money of P3SB2

$500.0
$414.8
Total NPV of Project

$400.0 Value for

Money of
$300.3
$300.0 $114.5 Million

$200.0

$100.0

$-
Public Sector Comparator - DBB Concert-Bird Partners

Private financing by the contractor costs more than public financing by government, but in the
case of the P3SB2 project, that cost was more than offset by the following factors:

1. Allocating risks to the party who can best manage them means that the contractor
bore many of the costs that the government would have borne in the traditional approach.
For example, the contractor pays for any changes needed during the construction period
due to design errors. The contractor also bears any cost increases for labour and material
during the construction period. Over the 30-year maintenance and renewal term, the
contractor will be responsible for replacing any defective or aged building parts or systems
at no additional cost to the public sector. Refer to Appendix B for a list of the major risks
that the P3 contract allocated to the contractor.

2. Using innovative building techniques and materials will save the government money
over the contract term. In the Request for Proposals stage, the three proponents presented
several innovations to meet stringent, long-term quality requirements set out in the
technical documents. The contractor will incorporate many of their innovative techniques
into the final design.

5
3. Achieving economies of scale by designing and building five schools in various parts
of Alberta on a tight schedule. For example, it costs much less (per boiler) to buy ten boilers
at the same time than two. Similarly, materials such as structural steel, brick and block,
windows, doors, floor finishes, and electrical and mechanical equipment cost far less when
bought and installed in bulk. Because the contractor had a guaranteed group of five
schools, it could secure a supply of most parts early in the construction period, avoiding
higher costs for later in the construction period.

4. Developing construction schedules that allow continuous and efficient workflow

between construction sites to minimize downtime between operations and reduce
mobilization costs for work crews and equipment.

Qualitative measures of value

1. Controlled scope. By bundling five schools into one package and awarding the entire
project to a single contractor, the government controlled the scope of the project and
managed the risk of any potential scope changes. The government worked closely with
each School Jurisdiction to ensure that their program needs were met early in the design
process, and that these requirements were clearly expressed to proponents during the
RFP phase. This ensures that all School Jurisdictions are treated equally and that each
receive schools with consistently high quality.

2. 30-year maintenance and renewal period. This gives the government and School
Jurisdictions assurance that the five schools will be maintained in good condition for 30
years. The P3 contract transfers maintenance of the schools to the contractor from the
School Jurisdictions for the term of the contract. This effectively gives the government a
30-year warranty for all five schools that there will not be deferred maintenance at the end
of 30 years as the contractor is required to handback the schools based on the
requirements of the contract.

3. Better workforce management. The relatively long time to set up a P3 allows proponents
to establish labour and equipment supply and to lock in contracts for materials supply.
Traditional contracts, typically with a two-month tender period, introduce additional risk
into the process, as the bidding contractor has only a short time to negotiate scheduling
of labour, materials, and equipment to arrive onsite at the right time. The P3 contractor
can also offer continued, attractive employment to workers.

Major risks allocated in P3 contract

An important factor in the delivery of P3 projects is an acceptable allocation of risks to the

party or parties best able to manage them. In some cases, the contractor is the appropriate
party to manage a risk; in others, the government can better manage the risk. For risks that
are difficult to define or are unknown, the risk may be best shared between the two parties.

6
 Appendix B shows a sample of the risk allocation between the government and the contractor
in the P3 contract and schedules. This list is not comprehensive. Refer to the P3 contract for
all the allocated risks4. A sample of the core risk elements are summarized below.

Cost overruns: the contractor bears the risk of any construction costs above the bid price in
the P3 contract. Maintenance and renewal payments are indexed based on the contract
formula, so the contractor pays any increased maintenance costs above the index during the
contract.

Schedule certainty: the contractor agrees to have the five schools available for use by the
School Jurisdictions by May 31, 2024 or receive reduced payments. The contractor will
manage the construction schedule to meet this date.

Weather: the contractor bears any costs of project delays caused by bad weather.

Scope changes during construction period: the government pays for any scope changes
that it or a School Jurisdiction want during construction. The government will pay for this work
in accordance with the change order process set out in the P3 contract.

Scope changes during maintenance and renewal period: the government or School
Jurisdictions may consider changes to schools. For example, changes in local demographics
may require a School Jurisdiction to request approval from the government to add modular
classrooms. The government may pay for this work, as long as the contractor accepts
competitive pricing based on a tendering process as specified in the P3 contract. Other
changes requested by School Jurisdictions may be their responsibility.

Interest rates and financing: proponents are able to elect for price adjustment to protect
against changes to interest rates and credit spread during the period between bid submission
and signing of the P3 contract. The government retains the risk of any changes if the preferred
proponent elects for price adjustment.

After signing the P3 contract, the contractor has to arrange for partial financing for the whole
term of the contract and is solely responsible for the impact of the financing arrangements.
No matter how much rates increase during the contract, the contractor must pay any increased
refinancing costs (if applicable). Conversely, the contractor can benefit from any rate drops.

Permitting: in the project’s procurement phase, the government worked with the various
applicable municipalities to ensure that development permits for all five schools were in place,
with as few conditions as possible. Once the contractor signed the contract, it was responsible
to have the municipalities transfer the development permits to it. The contractor assumed any
schedule risks of not being able to obtain the development permits on time.

4
The project agreement should be consulted for a comprehensive allocation of risks between the parties.
The final form of the project agreement is available at https://www.alberta.ca/public-private-
partnerships.aspx.

7
4. Project report
Alberta Education Goals

Goal 1: Fund the education system to provide learning opportunities that enable
student success.

The P3SB2 project supports Alberta Education’s commitment to fund education by investing
approximately $300.3 million (in 2021 dollars) to design, construct and maintain five new
schools that will enable student success and provide an environment that is conducive to
learning and teaching for the next 30 years.

Goal 2: Develop and implement policies, plans and strategies to support school capital
planning, manage the prioritization for funding of school capital projects and, in
collaboration with the Ministry of Infrastructure, manage the implementation of
approved capital projects.

The five schools have been identified as priority infrastructure projects within the province and
have been procured using alternative financing which ultimately for the P3SB2 project
provides VFM to taxpayers and supports effective capital planning.

Ministry of Infrastructure Goals

Goal 1: Manage the delivery of new construction and major modernization projects for
health, school and government-owned facilities and support the maintenance of
existing infrastructure. Use other procurement methods, such as public-private
partnerships, for the completion of capital projects where value for money for
taxpayers can be demonstrated.

The P3SB2 project supports this goal as a number of alternative financing models were
assessed prior to the procurement phase, with the DBFM model deemed to have the greatest
potential for generating VFM. The DBFM bids received from proponents were assessed on
closing and confirmed VFM for taxpayers.

Goal 2: Continuously improve, streamline and modernize planning, project

management and procurement to deliver capital projects on time, on budget and to
specification.

Cost and schedule certainty are priorities for the P3SB2 project. The DBFM model
demonstrated the greatest potential to achieve these priorities. The DBFM model provides
incentives to meet the target availability date within the desired budget.

Goal 3: Incorporate asset management principles to infrastructure projects throughout

the design, construction, operation, maintenance and divestment phases to support
effective decision-making related to facilities, land, leasing and accommodation
services to deliver public services at lower costs.

The DBFM model supports a lifecycle approach for the GOA to achieve long-term financial
and operational goals for the infrastructure developed (e.g. quality of maintenance and
service). Integrating maintenance considerations within the design and construction work

8
 provided opportunities for more effective maintenance solutions and consideration of building
systems operations.

Goal 4: Continue to implement innovative technologies to help reduce the

environmental footprint and maximize cost efficiencies of provincial infrastructure.

The schools are expected to be constructed to meet LEED Silver standards. The DBFM model
incentivizes the delivery of the Project to meet LEED standards through its payment
mechanism that imposes a penalty if LEED Silver certification is not achieved.

Project goal

• Build five high schools for students in the education system, in high-growth areas
of Alberta and address overcrowding. The P3SB2 project aims to develop new high
schools in the areas that need them to address overcrowding and alleviate enrollment
pressure.

• Ensure short-term cost certainty for building the five schools and long-term cost
certainty for maintaining them. The project shifts the risk of increased costs to the
contractor.

• Use innovative design, project delivery, and funding to meet the need for schools in
various regions across Alberta and ensure that schools are safe, healthy, and sustainable
to ensure the spaces are conducive to learning and teaching.

Project outcomes

• Construction of schools in some of the fastest growing communities. Across Alberta,

many areas have experienced significant growth in population. One of the main outcomes
of this project is to build high schools in these communities to address the needs of
increasing school-aged populations.

• Ensuring Alberta’s students are successful. Developing five new high schools in
communities where existing schools are over enrolled will strengthen the quality of
education in those communities, which is likely to help increase the high school completion
rate.

Project Scope and Out of Scope

The P3SB2 project includes the design, build, finance and maintenance of five high schools.
Appendix C lists the five high schools in the P3SB2 project.

The P3 contract does not include the following scope elements, which remain the responsibility
of the School Jurisdictions5:
• daily building services (e.g., movement of desks, chairs, and other furniture);
• cleaning, or routine, daily custodial work in schools; and
• supplying, installing, maintaining, and renewing:
— Broadband;

5
The project agreement should be consulted for a comprehensive list of all out of scope elements. The
final form of the project agreement is available at https://www.alberta.ca/public-private-partnerships.aspx.

9
 — Furniture, fixtures and equipment (including playground equipment); and
— Career & technology studies equipment.

Approaches considered
The government considered three alternative approaches to deliver the five schools:

1. Traditional Design-Bid-Build approach, with the usual “pay-as-you-go” financing by the

government and delivery by School Jurisdictions. Private-sector architects and
consultants, hired by School Jurisdictions, design the schools. Stipulated-price
construction contracts are awarded through a traditional open-bidding process tendered
by School Jurisdictions to private-sector contractors, under five individual projects. The
government approves the contracts under government policies and regulations. Daily
operations and maintenance, and infrastructure maintenance and renewal, are funded by
provincial grants.

2. Traditional Design-Build (DB) approach, with the usual “pay-as-you-go” financing by

the government and delivery by School Jurisdictions. The private-sector is engaged to
complete the full design and construction of the schools based on a stipulated-price under
a single contract through a traditional open-bidding process in five individual projects. The
government approves the contracts under government policies and regulations. Daily
operations and maintenance, and infrastructure maintenance and renewal, are funded by
provincial grants. Based on Alberta’s Public-Private Partnership Framework and Guideline
document (dated December 2020), the PSC used for comparison to the P3 model is the
DBB procurement approach. However, other models such as the DB can be considered
for suitable projects, therefore was also compared to the P3 model.

3. Design-Build-Finance-Maintain approach (the basis of the P3), with the winning private-
sector proponent (the contractor) forming a consortium or group to handle the project from
start to the end of the contract. The consortium will be responsible for completing detailed
design work and the ultimate construction of the schools, including the procurement of all
materials, as well as, labour and any necessary subcontracting. Once construction is
complete, the contractor is responsible for the ongoing maintenance of the schools for a
set period of time (in this project, 30 years), and for having a renewal plan for school
components to ensure they meet the performance requirements. School Jurisdictions still
handle daily cleaning and operations of the schools. The government makes monthly
payments to the contractor during the 30-year maintenance phase of the contract.
Payments start after the schools have reached total availability (by May 31, 2024) and
cover the ongoing capital, maintenance, and renewal costs. The government can reduce
payments based on performance criteria such as whether the schools are available for
use and whether the buildings meet certain standards.

Selection process

The government’s selection process was open, competitive, timely, fair and transparent. A
Fairness Auditor, Optimus SBR Inc., was appointed as Fairness Auditor for the P3SB2 project
and prepared a report on the fairness of the process. The report is included in Appendix D.

A Request for Qualifications was publicly issued on September 9, 2020. Four teams
responded and were evaluated on experience, personnel qualifications, past performance and

10
 financial capability. The three shortlisted teams were Plenary-Maple High Schools (PMHS),
Alberta Partnership for Learning (AP4L), and Concert-Bird Partners (CBP).6

The Request for Proposals (RFP) process ran from November 4, 2020 until July 22, 2021.
The “made-in-Alberta” approach to P3s ensures the process is competitive throughout. During
the RFP process, the proponents made both technical and financial submissions. The final
technical submissions were submitted on June 3, 2021 to ensure the minimum requirements
were met. Once Alberta was satisfied that all three proponents had achieved the minimum
technical specifications, the final financial submissions were submitted on July 22, 2021 based
on the final form of the P3 contract. These bids are summarized in Appendix F. CBP submitted
the lowest price, on a NPV basis, and won the contract.

The government also issued a draft form of the P3 contract and the shortlisted teams provided
comments on it. Before receiving financial submissions, the government issued the final form
of the P3 contract that the successful proponent signed. No negotiations on this contract were
allowed after financial bids were received.

Key terms of P3 contract

What the government must pay: The total cost of the approximate 32.5-year contract is
about $300.3 million (in 2021 dollars).

The government is providing partial funding (approximately $108 million) for the schools in an
amount that is approximately 50% of the cost of building the schools. This partial funding is
paid through progress payments over the course of construction. Payments commence once
30% of the construction is complete, and the remaining 70% of the partial funding is paid
monthly based on percentage complete during the construction period.

Upon construction completion (May 31, 2024), the government makes monthly payments to
the contractor in three separate streams: capital, maintenance, and renewal over the contract
term. Capital payments are fixed, while maintenance and renewal payments are indexed 7.

If any of the five schools are not ready by May 31, 2024, the government will not pay the
remaining progress payments for the incomplete schools until these schools are completed.
Additionally, the government will pay only 80% of the monthly capital payment for the
completed schools, until all five schools are completed. The contractor will thus lose capital,
maintenance, and renewal payments for every school not completed by the target date, plus
20% of the monthly capital payment for completed schools.

What the contractor must do: The approximate 32.5-year contract between the government
and the contractor has a two and a half year construction period and a 30-year maintenance
period. It requires the contractor to:

• complete the design and construction of the five schools across Alberta by May 31, 2024;
• partially finance the construction over the contract term;

6
The companies that make up the shortlisted teams are identified in Appendix E.
7
Four indices are used to calculate maintenance and renewal payments: AUPE Maintenance Service
Worker II published hourly salary; NAICS repair and maintenance hourly rate; Statistics Canada
consumer price statistics (excluding food and energy); and Statistics Canada non-residential building
construction price index for Edmonton and Calgary.

11
• maintain the five schools to the standards specified in the contract;
• have a renewal plan for school components to ensure they meet the performance
requirements; and
• hand back responsibility for maintenance and renewal of the five schools to the School
Jurisdictions on May 31, 2054, in a condition as prescribed in the contract.

Payments reduced for non-performance: The government can reduce all monthly
payments (capital, maintenance, renewal) if the contractor does not meet performance
standards in the contract. For example, if a roof does not meet performance criteria and the
contractor does not repair it within the allowed time, the government can reduce monthly
payments to the contractor.

A detailed description of all the payment adjustments is in Schedule 15 of the P3 contract.

Some examples of payment adjustments are provided in Appendix G. The final form of the
project agreement is available at https://www.alberta.ca/public-private-partnerships.aspx.

School Jurisdictions own the schools: The contractor has a license from the government
to access the schools for construction, maintenance, and renewal activities. The School
Jurisdictions can use the schools for education purposes and for community and other
purposes as defined between the municipalities and the respective School Jurisdictions.
School Jurisdictions remain publicly accountable for delivering education programs for all
schools in their jurisdictions.

Monitoring during and after construction

During construction, the government is using Workun Garrick Partnership Architecture and
Interior Design Inc.as its consultants to review the designs and ensure that construction
standards have been met. The contractor has to provide monthly reports on design and
construction issues.

In the maintenance and renewal period, the contractor will self-monitor and report on its
compliance with the technical requirements. The government will also do its own inspections
and testing to check reports and ensure the standards continue to be met. In addition, the
contractor’s lender will also have a consultant review its performance.

Accounting treatment
The accounting treatment for P3 projects follows generally accepted accounting principles set
out by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.
The obligation is “on-book”, so the province records the amount owing for the private financing
over the construction period and also records the cost of building the schools on its
consolidated balance sheet as a capital asset.

Project schedule
The P3 contract was signed on September 29, 2021 and construction started immediately
thereafter. The contractor must deliver the five schools by May 31, 2024 or face a payment
reduction. An independent certifier will certify when the five schools are available for use. The
five schools will open to students by September 2024.

The maintenance period starts after the schools are available and continues until May 31,
2054, when the license granted to the contractor to access the schools for maintenance and
renewal activities will expire. The contractor must hand back the responsibility for

12
maintenance and renewal of the schools in the condition specified in the contract. The
government and the contractor will assess the schools to ensure they are in the condition
specified in the contract when the contract expires. After the contract expires, the School
Jurisdictions will be responsible for operating, maintaining, and renewing the schools, using
traditional grant funding.

13
Appendix A: Commentary by KPMG

14
 KPMG LLP Telephone 416-777-8500
Suite 4600 Fax 416-777-8818
333 Bay Street Internet www.kpmg.ca
Toronto, ON M5H 2S5
Canada

Mr. Kenton Betts

Director, Major Capital Projects, P3 Implementation, Alberta Infrastructure

2nd floor, Infrastructure Building

6950 – 113 Street
Edmonton, AB T6H 5V7

November 15, 2021

Re: Alberta P3 Schools Bundle #2 – Value for Money Analysis

Dear Mr. Betts,

KPMG LLP (“KPMG”) has been retained by Alberta Infrastructure to provide financial advisory services for
the Alberta Schools P3 Bundle #2 project (“the Project”), which involves the design, build, finance,
maintenance (“DBFM”) of a bundle of five new high schools in Alberta.
As Alberta Infrastructure’s Financial Advisor, an element of our work is the development of a Public Sector
Comparator (“PSC”) for the Project which estimates the cost to deliver the Project using a traditional delivery
approach. The Financial Offers received from Proponents are compared to the PSC to ascertain whether
the P3 project delivers better value compared to a traditional delivery model (i.e., a “value for money”
analysis).
Based on Alberta’s Public-Private Partnership Framework and Guideline document (dated December
2020), the PSC used for comparison should be the Design-Bid-Build (“DBB”) procurement approach.
However, other models such as the Design-Build (“DB”) can be considered for suitable projects. Both the
DBB and DB models were considered for the Project, and the estimated values of both the PSC DBB and
traditional DB are included in this letter.
The following table summarizes the results of the value for money analysis for the three Proponents, namely
Alberta Partnership for Learning (“AP4L”), Concert-Bird Partners (“CBP”) and Plenary-Maple High Schools
(“PMHS).
Traditional
Comparison of PSC and PSC Procurement AP4L CBP PMHS
Financial Offers DBB DB Financial Offer Financial Offer Financial Offer
Total Cost on Net Present Value
$414.8 million $396.1 million $324.1 million $300.3 million $356.6 million
Basis (NPV’s to July 2021)

Financial Offer Rank Rank 2 Rank 1 Rank 3

Value for Money compared to

$90.7 million $114.5 million $58.2 million
PSC DBB ($)
Value for Money compared to
21.9% 27.6% 14.0%
PSC DBB (%)
Value for Money compared to
$71.9 million $95.7 million $39.5 million
Traditional DB ($)
Value for Money compared to
18.2% 24.2% 10.0%
Traditional DB (%)

As shown above, the Financial Offer submitted by CBP has the lowest net present value (i.e., cost to Alberta
Infrastructure) and CBP was selected as the Preferred Proponent. CBP’s Financial Offer, represents a
positive value for money of $114.5 million (27.6%) against the PSC DBB and a positive value for money of
$95.7 million (24.2%) against the traditional DB.

15
The calculation of the value of the PSC and the net present value of Financial Offers is based on a discount
rate of 2.81% and an inflation rate of 1.56%, reflecting the final discount rate and inflation rate issued by
Alberta Treasury Board and Finance (“Alberta Finance”) two days before the Financial Offer submission
deadline of July 22, 2021 for the SR Package 3. In calculating the net present values of the Financial Offers,
KPMG used the methodology as described in section 5.12 of the Instructions to Proponents dated
November 4, 2020 and as amended on April 20, 2021.
In developing the PSC, KPMG received input assumptions from Alberta Infrastructure’s project team and
Tech-Cost Consultants Ltd. (cost consultant to Alberta Infrastructure). Based on the inputs available, KPMG
constructed a financial model to estimate the cost of the Project over the proposed term of the DBFM
transaction on a net present value basis. Note that the cost estimate for the PSC is based on many
assumptions regarding the future which may or may not differ from the actual cost that would be incurred if
the Project is delivered traditionally.
This letter has been prepared by KPMG for Alberta Infrastructure (“Client”) pursuant to the terms of our
engagement agreement with Client for the Project (the “Engagement Agreement”). KPMG neither warrants
nor represents that the information contained in this letter is accurate, complete, sufficient or appropriate
for use by any person or entity other than Client or for any purpose other than set out in the Engagement
Agreement. This letter may not be relied upon by any person or entity other than Client, and KPMG hereby
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connection with their use of this letter.

We trust this letter meets your needs.

Yours truly,

Paul Lan
Partner
416-777-3205

16
Appendix B: Sample of risk allocations

Table 1: Sample of Risk Allocations between Government of Alberta and Contractor

This table shows a sample of the risk allocation between the government and the contractor in
the P3 contract and schedules. This list is not comprehensive.8

Traditional (DBB) Traditional (DB) P3 (DBFM)

GOA Contractor GOA Contractor GOA Contractor

Construction Risks
Design interaction with site • • •
conditions*
Construction interaction with site • • • • •
conditions
Site safety • • •
Construction methodology • • •
Construction costs • • •
Unforeseen site conditions • • •
Labour issues* • • •
Material issues* • • •
Design errors* • • •
Schedule issues • • • •
Construction quality issues* • • •
Scope changes* • • •
Delayed site access • • •
Material inflation • • • •
Wage inflation • • • • •
Not meeting agreed milestone • • •
dates
Adverse weather conditions • • • • •
Labour disputes • • •
Fire during construction • • •
Vandalism/theft/arson during • • •
construction
Damage and/or injuries to third • • •
party
Damage to work • • •
Damage and/or loss to utilities • • •
Defective materials • • •
Public interface • • • • •
Workplace health and safety • • •
Insufficient performance bonding • • N/A
Contractor insolvency* • • •
LEED penalty* • • • •
General Risks

8
The project agreement should be consulted for a comprehensive allocation of risks between the parties.
The final form of the project agreement is available at https://www.alberta.ca/public-private-
partnerships.aspx.

17
 Traditional (DBB) Traditional (DB) P3 (DBFM)
GOA Contractor GOA Contractor GOA Contractor

Land acquisition • • •
Life cycle management • • •
Stakeholders management • • •
Coordination and approvals • • •
through users
Third party objections • • •
Patent infringement • • • • •
GOA supplied data – accuracy • • •
GOA supplied data – sufficiency • • •
GOA supplied data – interpretation • • • • •
Utilities hook up/connections • • •
Internal capacity* • • •
Approval Risks
Concept approvals – • • •
environmental
Development permits* • • •
Building permits • • •
Occupancy permits • • •
Environmental permits • • •
Utilities crossing requirements • • • • •
Regulatory requirements • • • • •
Building Code compliance • • •
Land Use approvals • • •
Utilities approvals • • •
Municipal requirements • • •
Environmental Risks – Known
Geotechnical and Contamination* • • •
Archaeological • • •
Environmental Risks – Unknown
Geotechnical and Contamination* • • •
Archaeological • •
Technical Risks
Structure safety • • •
Design quality issues • • •
Material behaviour • • • • •
Construction process innovation • • •
Construction performance • • •
specification risks*
Operation performance • • •
specification risks
Lack of building system integration • • •
Aggressive schedule • • • • •
Delayed schedule caused by the • • •
public sector*
Future IT risk • • •

18
 Traditional (DBB) Traditional (DB) P3 (DBFM)
GOA Contractor GOA Contractor GOA Contractor

Financial and Economic Risks

Sourcing of capital – construction • • • •
Allocation of capital – operations • • •
Cash flow management – • • •
construction
Cash flow management – • • •
operations
Inflation risks prior to financial • • •
close
Exchange rate risks N/A N/A •
Base interest rate changes before • • •
Agreement signed
Interest rate changes after closure • • •
Inflation on operations, • • • •
maintenance and renewal
Inflation on construction • • •
Major change orders during M&R* • • •
Minor change orders during M&R* • • •
Economic Risk* • • •
Government withdrawing from P3s n/a •
Demand Risks
Modular additions above original • • •
projections
Modular additions (escalation • • •
impact)
Growth in student population over • • •
design capacity
Changes in school programming • • •
Under-utilized school facilities • • •
Appropriateness of schools • • •
Operations and Maintenance Risks
Changes in legislation • • •
Damage to property • • •
Deferred maintenance risk* • • •
Performance issues* • • •
Full school failure* • • •
Change in performance standards • • • •
Labour issues • • •
Material issues • • •
Non-availability of facility or • • •
portions thereof
Vandalism during O&M period • • • •
Other Vandalism during O&M • • •
Fire damage • • •
Flood and other natural disasters • • •
Water, air and/or soil pollution • • •
Labour disputes • • •
School security issues • • •

19
 Traditional (DBB) Traditional (DB) P3 (DBFM)
GOA Contractor GOA Contractor GOA Contractor

Unplanned major replacements • • •

Soft maintenance issues • • •
School Jurisdiction labour relations • • •
Consequential damage due to • • •
contractor non-performance
Facility condition risk at 20/25/30 • • •
years
Third party damages risk • • •
Liability insurance • • •
Business Risks
Bankruptcy of contractor • • •
Subcontractor default • • •
* Risks were quantified as part of the risk analysis conducted for the business case and during procurement.

20
Appendix C: Project Scope

Table 2: School Jurisdictions and communities served

Total Student
School Jurisdiction Community Project Type
Capacity
Edmonton School Division Edmonton – High School (10-12) 2,513
Southeast
Black Gold School Division Leduc High School (10-12) 1,121
Edmonton Catholic Separate Edmonton – High School (10-12) 1,330
School Division Heritage Valley
Wolf Creek School Division Blackfalds High School (9-12) 970
Rocky View School Division Langdon Junior/Senior High 1,004
School (7-12)
Total 6,938

21
22
Appendix D: Commentary by Fairness Auditor

23
 33 Yonge Stroronto, ON M5E 1G4T: 416.649.

25 October 2021

Attention: Mary Persson

Deputy Minister Alberta Infrastructure

Subject: Fairness Auditor Report – Alberta Infrastructure Request for Proposal (“RFP”) Design, Build,
Finance and Maintenance of Five New High Schools in Alberta, Canada

OPTIMUS|SBR (“Optimus”) was engaged as the Fairness Auditor to review, observe and confirm the processes of
communication, evaluation and decision-making associated with the procurement process for the Request for
Proposals for the Design, Build, Finance and Maintenance of Five New High Schools Project RFP, issued by
Alberta Infrastructure. Our role related to ensuring openness, fairness, consistency and transparency from the
RFQ transition through to the conclusion of the Project RFP process.

Optimus hereby presents its final procurement fairness attest report to Alberta Infrastructure at the conclusion
of the RFP stage in the procurement process, describing how the procurement process has complied with
requirements. The following chart included below is in accordance with Alberta Infrastructure’s procurement
guidelines. It summarizes our involvement and findings:

Fair
Stage Task
(Yes / No)

Pre- RFP Issue

The procurement documents, including the evaluation tools, were

reviewed and were deemed to be consistent with the guidelines
Yes
1. established by Alberta Infrastructure and the Procurement
Framework

The RFP open period was consistent with the Procurement Manuals Yes
2.
The time of the submission closing was clearly identified in the
Yes
3. procurement documents

RFP Open Period

Procurement documents were made available in an open and

Yes
4. equitable manner
 33 Yonge Stroronto, ON M5E 1G4T: 416.649.
Fair
Stage Task
(Yes / No)

Mandatory meetings were clearly identified in the procurement

documents and there were no meetings of which all Proponents Yes
5.
were not notified

Answers were made available to all Proponents for all questions

Yes
6. that were submitted through the Request for Information protocols

Alberta Infrastructure confirmed that the requisite information

Yes
7. would be made available regarding the results of the procurement

All participants confirmed their adherence to the conflict of interest

Yes
8. and confidentiality requirements throughout the RFP Open period

Protocols were in place to control access to information as

appropriate, including protection of Commercially Confidential Yes
9.
information

Proponents confirmed their adherence to the conflict of interest

Yes
10. and confidentiality requirements in their submissions

The submissions were logged and recorded upon receipt, clearly

Yes
11. confirming Proponent submissions were received on time

The composition of the Evaluation Teams adhered to the Evaluation

Yes
12. Manual document

There was a protocol in place to ensure that document

Yes
13. confidentiality was maintained

Post RFP Close

The evaluation criteria and process were included in the RFP Yes
14.
The evaluation manuals were finalized before the Closing of each SR
Yes
15. submission

Evaluators were trained on the evaluation tools Yes

16.
 33 Yonge Stroronto, ON M5E 1G4T: 416.649.
Fair
Stage Task
(Yes / No)

The pricing was opened as per the procurement process according

Yes
17. to the RFP and the Evaluation Manuals

The pricing submissions were opened only for Proponents who met
the requirements of the procurement process according to the RFP Yes
18.
and Evaluation Manuals

Evaluations were done in an unbiased manner and in accordance

Yes
19. with the Evaluation Manuals

The selection of the “First Negotiation Proponent” was approved

Yes
20. according to the RFP documents and Evaluation Manuals

Debriefings are to be provided for all unsuccessful Proponents and

Yes
21. are to be offered for the successful Proponent.

Observations and Findings

The procurement process was established clearly in Alberta Infrastructure’s guidelines. The evaluation process
and criteria described in the procurement documents were applied consistently and equitably. In the final
evaluation discussions, the evaluators demonstrated that they had been diligent in their responsibilities, that
they were able to support their individual evaluation assessments and that they held no bias for or against any
Respondent. There were no unresolved issues at the RFP stage of the procurement. Consensus was reached and
confirmed by all SR1 and SR2 evaluators. An official record was produced to document the evaluation and
scoring consensus decisions, including the supporting rationale.

Conclusion

As a result of the Evaluation Teams consensus processes, and presentation to the Evaluation Management Team
on June 22nd, 2020 and following the SR3 financial submission results, an approval of the RFP results and
identification of a First Negotiation Proponent was achieved. Optimus confirms that the identified First
Negotiation Proponent successfully satisfied the requirements of the RFP evaluation process.

As the Fairness Auditor for the Project, we certify that the principles of openness, fairness, consistency and
transparency have been, in our opinion, properly established and maintained throughout the procurement
 33 Yonge Stroronto, ON M5E 1G4T: 416.649.
process. Furthermore, we were not made aware of any issues that emerged during the process that would
impair the fairness of this initiative.

As Fairness Auditor, we attest that:

a) The Project RFP process was conducted in accordance with the provisions of the RFP and met the
fairness and transparency requirements established in the RFP and other related policies of Alberta
Infrastructure and the Government of Alberta.
b) Alberta Infrastructures’ personnel and external advisors adhered to Alberta Infrastructure’s conflict of
interest and confidentiality requirements, and
c) All Applicants were treated consistently in the evaluation process and in accordance with the Project
RFP and the established principles of fairness, openness and transparency.

Optimus SBR.

_________________________ ____________________________
Lead Fairness Auditor Vice-President
Jamie O’Brien Procurement and Fairness Advisory Services
Greg Dadd
Appendix E: Proponent Teams

Table 3: Composition of proponent teams invited to participate in RFP process

No. Consortium List of Companies

1 Plenary-Maple High Schools • Maple Reinders Constructors Ltd (Design-
(PMHS) Construction Lead, equity provider)
• Honeywell Limited (M&R Lead)
• Plenary Americas LP (Project Lead, Financing
Lead, equity provider)

2 Alberta Partnership for Learning • Graham Capital Partners LP (Project Lead,

(AP4L) Financing Lead, equity provider)
• Graham Design Builders LP (Design-Construction
Lead)
• Johnson Controls Canada LP (M&R Lead)

3 Concert-Bird Partners (CBP) • Bird Design-Build Construction (Design-

Construction Lead)
• Bird Capital Limited Partnership (Financing Co-
Lead, equity provider)
• Concert Infrastructure Ltd (Project Lead, Financing
Co-Lead)
• Ainsworth Inc. (M&R Lead)

28
Appendix F: Summary of bids received

Table 4: Financial bids received from proponents on July 22, 2021.

Item Public Sector Traditional P3 Procurement ($million)

Comparator DBB Procurement DB
($million) ($million) AP4L CBP* PMHS
Total NPV of design,
construction, finance $414.8 $396.1 $324.1 $300.3 $356.6
and maintenance
VFM of P3
procurement ($) vs. Not applicable Not applicable $90.7 $114.5 $58.2
DBB
VFM of P3 (%) vs. DBB Not applicable Not applicable 21.9% 27.6% 14.0%
VFM of P3
Not applicable Not applicable $71.9 $95.7 $39.5
procurement ($) vs. DB
VFM of P3 (%) vs. DB Not applicable Not applicable 18.2% 24.2% 10.0%

*
CBP was the proponent team that developed and submitted the successful proposal. Once the RFP
process was completed, the project leads for CBP formed a special purpose organization, Concert-Bird
Partners to carry out the work of the contract.

29
Appendix G: Payment adjustments

Table 5: Sample of key payment adjustments included in P3 contract9

This table shows a sample of key payment adjustments included in the P3 contract. This list is
not comprehensive.

Issue Payment Adjustment

Failure to correct deficiencies identified by External $5,900 / week for first four weeks;
Audit within specified time $11,700 / week thereafter
Failure to develop and provide 5-year Maintenance
Plan on first day of school year $1,400 / week

Failure to develop and provide 5-year Renewal

Management Plan on first day of school year $1,400 / week

Failure to register each school with Canada Green

Building Council (LEEDTM Requirement) $300 / day / school

Failure to achieve LEEDTM Silver Certification within $1,000,000 for first school and $500,000
24-months from school availability for each school thereafter
Failure to deliver required construction schedules and
submittals to province within time specified $1,800 / day / undelivered schedule

Failure to rectify any default with respect to site

requirements within time specified $1,800 / day / default

Failure to rectify any default with respect to

maintenance and renewal waste disposal $400 / day / default
requirements within time specified
Failure to provide as-built drawings and updated
operations and maintenance manuals to province $2,400 / month / undelivered set
within time specified

$6,000 to $23,000 per day or partial day

School building is inaccessible (school holidays inclusive); and $35,000
during examination periods

Failure to make repairs within the repair period or Emergency failure - $3,500 / occurrence
install temporary protection and measures Urgent failure - $2,300 / occurrence
Routine failure - $1,200 / occurrence

9
The project agreement should be consulted for details on all payment adjustments. The final form of the
project agreement is available at https://www.alberta.ca/public-private-partnerships.aspx.

30